King Digital Entertainment Plc, the maker of the “Candy Crush” smartphone game, slid on the first day of trading after raising $500 million in its initial public offering.

The shares dropped 10 percent to $20.20 at 12:46 p.m. in New York, after the IPO was priced at $22.50 each. King and shareholders Apax Partners LLP and Index Ventures had offered the stock for $21 to $24.

At the IPO price, King is valued at $7.09 billion, which makes it cheaper -- relative to projected sales -- than publicly traded peers including Giant Interactive Group Inc. and Zynga Inc., data compiled by Bloomberg show. That may have had investors betting that they could profit from a quick jump in the shares once they began trading, said Jeffrey Sica of Sica Wealth Management LLC. Instead, concern that the popularity of “Candy Crush” will wane is weighing on the shares, he said.

“There were a lot of people hoping for momentum off the open and that didn’t happen,” Sica, whose firm in Morristown, New Jersey, oversees more than $1 billion in assets. “If you don’t get momentum out of the gate you’re not going to get it, and it makes sense to cut your losses quickly rather than wait.”

Zynga Remembered

King shares were offered at a multiple of 2.7 times projected sales of $2.62 billion, based on an estimate from Arvind Bhatia, an analyst at Sterne Agee & Leach Inc. Giant Interactive traded at 6.3 times estimated 2014 sales, and Zynga fetched 5.2 times as of yesterday’s market close. Activision Blizzard Inc., the largest U.S. video-game publisher, traded at 3.2 times estimated 2014 sales.

“Candy Crush,” a puzzle game featuring different-colored candies, has 97 million daily active users, the IPO prospectus shows. It accounts for 78 percent of King’s sales, which King generates when users purchase virtual items, such as extra lives or additional content, for about $1 apiece. Its other games, including “Farm Heroes Saga” and “Bubble Witch Saga,” each have fewer than 20 million daily users.

King’s discount may reflect lessons investors learned following Zynga’s debut. The maker of “FarmVille” went public in December 2011, dropped 5 percent in its first day of trading and slumped almost 80 percent in the subsequent year. Zynga’s revenue, like King’s, was concentrated in one major source at the time of its IPO: more than 90 percent of its sales came from Facebook Inc. Shares continued to slide as Zynga’s users started defecting to “Candy Crush.”

Growth Potential

There’s revenue potential for King in growing its lesser-known games, according to Chief Executive Officer Riccardo Zacconi.

“Our strategy is not focused on finding another ‘Candy Crush’ -- ‘Candy Crush’ has been an incredible success,” Zacconi said in a Bloomberg TV interview from the New York Stock Exchange. “The target is to build a portfolio of high-quality games.”

Unlike Zynga, which hasn’t posted an annual profit since it went public, King’s after-tax profit margin was 30 percent last year, its prospectus shows.

Apax, which planned to sell about 2 percent of its shares in the IPO, invested 28.9 million euros in King in 2005, then worth $35 million. The IPO price values its pre-offering stake at $3.25 billion. In addition, the firm has received $266 million in dividends.

U.S.-based investors in Apax, a majority of the firm’s backers, will score about a 100-fold partly realized gross profit in the offering. The firm’s euro-based investors will post about an 87-fold gain.

Index Ventures, a Geneva-based venture-capital shop that invested 5 million euros alongside Apax, will reap a return of similar magnitude.

King’s shares are listed on the New York Stock Exchange under the symbol KING. JPMorgan Chase & Co., Credit Suisse Group AG and Bank of America Corp. managed the offering.